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HomeMy WebLinkAbout06/01/2004, PH 1 B - 2004 WATER FUND REVIEW C council "' a 1, 2004 j accnaa izepoin Nwib � fL CITY OF SAN LUIS OBISPO FROM: John Moss, Utilities Directo Prepared By: Sue Baasch,Administrative alyst Gary Henderson, Water Division Manager SUBJECT: 2004 WATER FUND REVIEW CAO RECOMMENDATION 1. Review and accept the 2004 annual water fund financial review; and 2. Approve and adopt a resolution increasing water rates by 8%, effective July 1, 2004 3. Direct staff to return with a public hearing on June 15, 2004 with a Resolution amending Water and Wastewater Development Impact Fees effective September 1, 2004. 4. Approve the amended CIP Program request for the Water Treatment Master Plan Implementation increasing funding by$235,000 for design, and$3.59 million for construction and construction management to a total of$7.8 million for construction and construction management. REPORT IN BRIEF The 2004 Water Fund Analysis shows that with moderate annual rate increases over the next 8 years, the City's Water Fund will continue to be healthy and stable, capable of supporting continued and expanded operations and capital programs. This analysis includes supplementing the City's water supplies through participation in the Nacimiento Pipeline Water Supply Project and implementation of the recycled water program. The analysis also considers implementation of Water Master Plan improvements and an ongoing level of capital maintenance projects aimed at maintaining our water infrastructure assets at industry standard levels. Given the proposed rate increase, the first proposed rate increase in five years following a 10% roll-back in rates in 1999, it is important to ask how the water fund has managed to stay healthy without rate increases. Several factors have allowed the water fund to support new programs and adapt to the economic pressures affecting all City operations: a. Ongoing cost containment measures like the off-peak pumping at the Water Treatment Plant and the budget reductions taken by all water sections for this financial plan; b. Replacing older water meters four years ago with the highly accurate Metron meters; c. Updating the development impact fees to ensure new development pays its fair share of the resources and improvements required to support it; d. Receiving excellent bids and a state grant of$2.9 million for the water reuse project; `,t IBJ 2004 Water Fund Review Page 2 e. Maintaining a healthy working capital balance that absorbs year-to-year fluctuations in revenue and allows time to plan for large capital projects. Important water system infrastructure improvements have been completed over the past several years, and the current financial plan and fund analysis continues this commitment to system maintenance and improvements. San Luis Obispo has prudently committed to an ongoing appropriate level of capital funding that ensures sound water infrastructure. Additionally, the proposed rate increases should also be considered in light of two significant moderating factors: 1) current rates are essentially equivalent to water rates in 1994; and 2) the significance of the accomplishments in regard to water supply and infrastructure improvements that are to be achieved within the proposed increase. Within what would equate to essentially annual cost of living increases over a 17 year timeframe (1994-2011) the City will have; accomplished significant improvements to our water treatment and distribution facilities, upgraded our levels of capital maintenance improvements, constructed and implemented a water recycling project, increased our water conservation program services, and improved the overall service reliability of our water supply to the community through participation in the Nacimiento Pipeline Water Supply Project. This analysis also includes maintaining a working capital balance of more than the minimum 20%, with a recommended goal of establishing and maintaining a 30% working capital reserve balance. This allows us to plan prudently for a drought contingency fiscal reserve to cushion the impacts of revenue losses due to the associated reduced water sales, and recognizes the probable inadequacy of the 20% minimum reserve requirement in funding any significant capital emergency given the extent and value of our water infrastructure. Maintaining a strong reserve also allows us to reduce our ongoing debt service associated with the Nacimiento Project by paying our share of the design cost from working capital as opposed to debt financing. In summary, the 2004 water fund analysis is positive: with moderate rate increases over the next several years, the City will secure a new source of water, maintain its water system infrastructure, plan for the future, and ensure resource and revenue adequacy. DISCUSSION Water Supply Improvements This annual rate review recommends the adoption of the first of a series of required annual rate increases in order for the fund to maintain fiscal health while achieving one of the most significant Major City Goals in the City's history, securing an additional long-term water supply. Long-tern water supply development has been a Major City Goal since the early 1990s. During this time we have seen the objectives of this elusive goal move from one water supply project opportunity to another, all seemingly increasing in cost and complexity. At this time and included in this analysis, it now appears that the City will achieve water supply adequacy and reliability with the completion of several key water supply projects. The Water Reuse project,was approved by Council in 1997 and construction of the backbone storage and distribution system will be completed in fall of 2004. This is the first significant new -aZ-2 J 2004 Water Fund Review Page 3 water supply added to the City since the completion of the Whale Rock Reservoir and transmission facilities in 1962. The Water Reuse project is being funded through a combination of State Grant ($2.9 million) and State Revolving Loan funds ($11 million) with annual debt service payments for Water Reuse beginning in 2004-05 ($573,000). Development of additional yield from our groundwater resources has been scaled back in this analysis to include only increasing production from those wells not requiring nitrate removal. This was due to the high estimated capital and operating cost of the nitrate removal treatment system. This strategy will allow the City to take advantage of any reduced pumping from the basin as a result of development and to defer the high cost of treatment until further analysis and study is completed. A thorough discussion of this revised strategy will be presented to the Council on June 15, 2004 in the Annual Water Resources Status Report. A preliminary design report for the required groundwater treatment facilities will be presented to Council later this summer. Increasing the yield from our groundwater resources has been reliant upon our ability to demonstrate a no net impact to either the San Luis Obispo Groundwater Basin or the stream flows it supports. Proposed development projects in the area overlying the basin are creating the opportunity to increase our yield from the basin for potable purposes while, decreasing agricultural pumping. Enhancements to the City's water conservation program were approved with the 2003-05 Financial Plan. Water conservation continues to remain a key component of our water resource strategy and the overall program costs are $406,500 per year. Water conservation is perhaps the City's most cost effective supply, but we have already maximized the potential supply benefits from conservation and the annual program costs represent the ongoing maintenance costs for the program. Even with the potential development of significant additional supplies from Nacimiento, the City remains committed to achieving the highest levels of conservation through quality conservation service programs. Participation in the Nacimiento Pipeline Water Supply Project is above all the most significant water supply achievement in terms of both cost and benefit. The project as identified will provide the City with an additional 3,380 acre-feet per year of yield, providing adequate yield to meet our current General Plan build-out needs and provide greatly improved system and service reliability. The total project cost for the Nacimiento Project is estimated at $148 million for design and construction. The City's share of that cost is projected at $6 million for design and $64 million for construction. Current working capital balance as well as revenues from the recommended rate increases will allow the City to fund the design costs on a pay as you go basis with projected payments of $359,600 in 2004-05, $1.3 million in 2005-06 and $3.6 million in 2006-07 and $766,000 in 2007-08. Debt service and operations and maintenance payments for the project are projected at $5.4 million beginning in 2010-11 and annually thereafter for the remaining life of the bonds (30 years). Staff has included in this analysis a Nacimiento Contingency/Reserve at 10% of the annual payment to serve as working capital for the City's share of project repairs or other unanticipated expenses.. At this point, the funding for the Nacimiento project is projected on an order of magnitude basis. The recommendation for adoption of only a single year rate increase at this time will allow time for continued refinement of information relative to project cost. It is important to project future 2 ;� - 2 `1 _ n 2004 Water Fund Review Page 4 rate increases based on what we know today so that Council has a picture of the project costs and implications, however, actual rate adoption should be based on more refined information as it is developed. Our current rate setting strategy of two years in concert with our financial planning process should work well, in terms of timing and refined information, with the development of the Nacimiento project through design and constriction. Following this period of significant expenditures and associated projected rate increases it is anticipated that the Water Fund will return to a more stable rate condition comparable to inflation. Water Master Plan Improvements Design of the Water Master Plan Improvements to our Water Treatment Plant is anticipated to be completed this summer. This analysis projects completion of the Master Plan Capital Improvements to our Water Treatment Plant in 2004-05 at a projected cost of $8.035 million. Funding for the Water Treatment Plant Master Plan Improvements will increase annual debt service by$591,200 in 2005-06. Issues on the Horizon Utility Billing Services -With increasing water and sewer rates and customer growth, the need to complete a thorough review of our customer service/utility billing programs is becoming an increasing priority. Staff would like to propose that we return to Council in the fall of 2004 with a complete report outlining our customer service programs in need of review, current issues with those programs and the goals of the review. With Council concurrence staff would propose completing the review in 2004 with implementation of the recommendations to be included for consideration in the 2005-07 Financial Plan. Customer service programs currently identified for review include; service area expansion impacts to meter reading and billing, automated/remote meter read options, distribution/customer/finance staffing analysis, billing frequency, water use information for conservation program development and customer service, and accommodating metering and billing for water reuse customers. Working Capital —The City's current policy for minimum working capital balance is 20% of the operating program requirements. This funding is intended to cover unforeseen one time emergencies or may be used to provide some increased level of rate stability with Council approval. Given the high costs associated with infrastructure emergencies and the potential for significant capital improvements causing rate instability, staff would like to return to Council with a discussion and possible consideration for amending (increasing) our minimum working capital requirements. Radio System Upgrade — The Finance and Information Technology Department is currently working with a consultant on an analysis and recommendation for implementation of a radio system upgrade. The current system is aging and the technology behind the system no longer complies with FCC policy. The system serves Police, Fire, Public Works, Parks and Recreation and Utilities. Utilities relies heavily on the radio system for dispatch of field crews and communication between crews on routine and emergency operations. The Enterprise funds will be expected to participate financially in the Radio System Upgrade once the project is defined and costs are known. The Finance and Information Technology'Department will be bringing a recommendation for the Radio system Upgrade to Council later this year. n 1L U 2004 Water Fund Review Page 5 2004-05 BUDGET: Water Fund Operations The table below shows the requested budget for 2004-05 water fund operating programs.. • . . . 0i• Administration 9519000 Source of Supply 19041,700 Conservation 4069500 Water Treatment Plant 191179000 Distribution 830,100 Customer Service 2719000 Total - 49617,300 Requests for Significant Operating Program Changes There are no requested Significant Operating Program Changes at the present time for the Water Fund. Completion of the Water System Vulnerability Analysis and Emergency Response Plan may result in some requested operating program changes or capital improvements associated with the need for increased security of our facilities. These changes will be proposed to Council at mid year or with the 2005-07 Financial Plan. 2004-05 Capital Improvement Plan Request An additional $235,000 for design and $3,590,300 for construction is being requested for 2004- 05 to fund needed improvements to our water treatment plant. A Capital Improvement Plan Request for Water Master Plan Improvements was provided in the 2003-05 Financial Plan based on information from the Water Facilities Master Plan completed and adopted in 2000. During the preliminary design analysis a number of other improvements were identified by staff for inclusion in the project. These areas were not identified in the "higher level" review undertaken during the Water Master Plan development. In addition the Master Plan identified a need for an additional sedimentation basin which was not included in the initial CIP request for this project. Funding has been included in this revised CIP request for an additional sedimentation process as well as other needed improvements/upgrades identified above. The additional sedimentation process will be required to treat Nacimiento water. The project is anticipated to be debt financed. The Capital Improvement Plan Request is included as Attachment 4. Rate Review Exhibits Financial schedules providing detail for the Water Fund analysis are provided in Attachment 2.A through 2.C. These include an analysis showing changes in working capital from 2003-04 to 2011-12; a summary of key assumptions by year for fund projections; and the projected capital improvement plan. 2004 Water Fund Review Page 6 Rate Setting Methodology In determining water revenue requirements and setting recommended rates, the following general methodology is used: Step 1: Determine Water Fund revenue requirements for: a. Operations and maintenance b. Capital improvements and replacements a. Debt service obligations (existing and projected) Step 2: Subtract from this amount "non-rate revenues such as: a. Interest earnings b. Connection fees and meter sales c. Revenues from other agencies (Cal Poly) d. Other service charges (service start-up fees, late charges,etc.) Step 3: Identify water rate requirements: a. Revenue needed to be generated from water rates is the difference between water revenue requirements (Step 1) and"non-rate"revenues (Step 2). Step 4: Determine new rates: a. Model the rate base (consumption and customer account assumptions) against the existing rate structure and rate requirements identified in Step 3. Because this analysis is performed over a multi-year period, other factors.are considered, such as working capital available to support capital projects, debt service requirements, and minimum working capital policy. Summary of Key Assumptions The following is a summary of key assumptions for expenditures and revenues: a. Operations and maintenance costs are based on the 2004-05 budget with an inflation rate of 3% thereafter. b. Sales to Cal Poly are based on historic use and the 2003 Agreement between the City and the University. This agreement set the .proportion (61%) of the non-residential rate the University pays to account for the University's difference from other customers (own water supply and capacity interest at the Water Treatment Plant). c. Debt Service is increased by $573,100 in 2004-05 to pay for the construction of the water reuse project. d. Debt service is increased by $591,200 in 2005-06 to pay for Water Treatment Plant master plan improvements. Operations and maintenance costs are increased by $135,400 for the upgraded Water Treatment Plant in 2005-06. i - 1r� 3 2004 Water Fund Review Page 7 e. Development impact fee revenues are estimated based on the proposed increased development impact fee, inflation and customer growth assumptions. This analysis assumes a varying percentage collection of these fees. Development occurring under maps vested prior to impact fee establishment pays only those fees in place at the time of approval. f. Water Rates are increased by 8% in 2004 and are projected to increase between 5 and 8 % per year to 2011. Development Impact Fees Revised Water Development Impact.Fees have been developed to be consistent with City policy that new development pay its share of the resources required to serve it, and are consistent with the requirements of AB 1600. The water development impact fee is being recommended to increase to fund new development's share of the Nacimiento Pipeline project and other supply and master plan projects as appropriate. Staff is recommending that Council direct staff to return with a resolution adopting revised Water and Wastewater Development Impact fees on June 15, 2004 with the recommended fee increases to become effective September 1, 2004. Estimated revised Water Development Impact Fees have been assumed in the 2004 Water Fund analysis. Water Rate History Water rates have been very stable over the last ten years; in fact, rates were rolled back in July 1999 by ten percent and have not changed since that time. The current rates are slightly less than the rates in 1994. year Water Service Rates . - 2004-05 1-5 ccf 2.71 Recommended More than 5 ccf 3.40 2003-04 1-5 ccf 2.51 More than 5 ccf 3.15 2002-03 1-5 ccf 2.51 More than 5 ccf 3.15 2001-02 1-5 ccf 2.51 More than 5 ccf 3.15 2000-01 1-5 ccf 2.51 More than 5 ccf 3.15 1999-00 1-5 ccf 2.51 More than 5 ccf 3.15 1998-99 1-5 ccf 2.79 More than 5 ccf 3.50 1997-98 1-5 ccf 2.79 More than 5 ccf 3.50 1996-97 1-5 ccf 2.75 More than 5 ccf 3.45 2004 Water Fund Review Page 8 1995-96 1-5 ccf2.65 More than 5 ccf 3.35 1994-95 1-5 ccf 2.60 More than 5 ccf 3.25 Oct 1993 1-5 ccf 2.45 More than 5 ccf 3.05 Mar 1993 1-5 ccf 2.25 More than 5 ccf' 2.80 In March 1993, the rate structure was changed to become totally consumption based, eliminating minimum charges. Water Rate Projection Projected water rate increases are required to fund the City's high level of ongoing services and meet our debt service obligations for increasing water supplies (Nacimiento/Reuse) and Water Master Plan Improvements. The following schedule shows the recommended water rates over the next 7 years. Staff is recommending adoption of only the first year of these projected rate increases at this time. These rate projections are consistent with information presented to Council in February with respect to the Nacimiento Pipeline project. Should project or other significant information change over time, adjustments may be recommended with our annual rate reviews. Year Water Service Projected Rates per CCF Rate Change 2004-05 1-5 ccf 2.71 8.0% Recommended More than 5 ccf 3.40 2005-06 1-5 ccf 2.93 8.0% Projected More than 5 ccf 3.67 2006-07 1-5 ccf 3.13 7.0% Projected More than 5 ccf 3.93 2007-08 1-5 ccf 3.35 7.0% Projected More than 5 ccf 4.21 2008-09 1-5 ccf 3.59 7.0% Projected More than 5 ccf 4.50 2009-10 1-5 ccf 3.80 6.0% Projected More than 5 ccf 4.77 2010-11 1-5 ccf 4.03 6.0% Projected More than 5 ccf 5.06 2011-12 1-5 ccf 4.23 5.0% Projected More than 5 ccf 5.31 2004. Water Fund Review Page 9 Summary In summary, the 2004 water fund analysis is positive: with moderate rate increases over the next several years, the City will secure a new source of water, maintain its water system infrastructure, plan for the future, and ensure resource and revenue adequacy. FISCAL IMPACT The recommended and projected rates reflecting annual rate increases of 5 to 8% per year to 2010 will provide the Water Fund with the revenues required to continue to maintain fiscal health while accomplishing significant capital. improvements and a Major City Goal of attaining an additional long-term water supply. The water rates for 2004 are shown in Attachment 1 and Exhibit A of Attachment 3. ATTACHMENTS 1. Proposed Schedule of Monthly Water Rates 2. Water Fund Review Exhibit 2. A—Changes in financial position Exhibit 2. B —Assumptions for fund projections Exhibit 2. C—Capital improvement plan 3. Resolution rescinding Resolution # 8934 (1999 Series), and increasing water rates by 8.0% effective July 1, 2004. 4. CIP Request—Water Treatment Master Plan Implementation. — qlb Attachment 1 MONTHLY WATER SERVICE RATES Rates Effective July 1, 2004 Inside the City Rates 1 5 CCF $2.71/CCF 5-10 CCF $3.40/CCF Outside the City Rates* 1 5 CCF $5.42/CCF 5-10 CCF $6.80/CCF * For service to customers outside the City the rates are 2 times the in City rate. p Attachment 2 A N O SSSSSSSO SSS � s8 8 S S Z5 N W 7 O n — O of n7 C: _ 88888 § � d g � 888 $ 8 W ren �b N O O O O h N � M - W N N V V1 00 n C 7 M Q O rl - QQ - QQ N s S 88888 � a 8Q8 $ C � oo � 00 $ 3 N a V1 7 h N V1 M h h 00 n n O M 0000 of oo h v m W vi — vi. as v3• ., O N ? 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CL mm a m m U EO N W C G7 N W O 8 g m m v N LP m ^ d C W m � N LLl x Z O °� M O C N G O V a ^W o Z m m p 2 m tt) Z LO o `gg° m m O LL m c N L E m 9 W m O W E m O C G c c m `� m >o E a to O F m C m ¢ c y ^ to .m W N .. x i _ y m o a a cO7 m o W ® Q E d o S ® m o m m m L v o`a n m dF o ggccE jp LL. U c c c 2 N o m m m Cr ¢ LL > > m & c m a a m m @ c m 9 0 ez M W m 8 m m ; U. 0 dorm = = qo m a m m .0 E C 0 _ o c '° ? C4 m c m m — N m m m O c 'm c -c w 3 f m _ o ro ¢ m $ N a o� LL g a` ro d` tg 8 8 8 m m v Cg z a m m g i m m m m o a ' A 7 0 m m N Cl) (A 0) _ U O m m N Fi m y m E C) u B B i m > o 5 ¢ U. E N a o z z z o s 0 3 S \� Attachment zc N . LO \ \ 40 k g ƒk k . 7 2 w . IZ 40 coo / to CM \� C 0 S . 40 ! ■ e a § § /� LO 0SCM \ e coo 408 a . [ 2#§ Lo ! � ® } 22 8 Ct 8 aa § § § § § 0 k �(NCM $ \ 2 ■ 00000 $ ) Lo k 00 \0 C4 8 2 OF 0 z : LL cc§ 22 q §§ § § aLLI . IM Mk ■ L 4 Lo CL ! D . § � / . g E E > ) $ E ƒ 7 $ � � » � 0 2 \ E 2 { � \ \ � ! e � Z £ ! . , ■ 2 ; « ! » E ■ c § C , • ■ a #� a � ` _ • ; a � ` ) LL % � f ■ {f cc + � « _ % � , � � , Qf # � g E k It CD 2 /! 2 $ ƒ2i k cm » J ATTACHMENT 3 RESOLUTION NO. (2004 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO ESTABLISHING WATER SERVICE RATES WHEREAS, it is the policy of the City of San Luis Obispo to review enterprise fund fees and rates on an ongoing basis and to adjust them as required to ensure that they remain equitable and adequate to fully cover the cost of providing services; and WHEREAS,a comprehensive analysis of Water Fund operating,capital and debt service needs has been performed for fiscal years 2004-05 through 2010-11; and WHEREAS, this comprehensive analysis has been revised based on updated revenue and expenditure information; and WHEREAS,the Council has reviewed the Water service rates necessary to meet system operating, capital and debt service requirements. NOW,THEREFORE,BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: SECTION 1. Resolution No. 8934(1999 Series) is hereby rescinded,effective July 1,2004. SECTION 2. The rates set forth in Exhibit"A"are hereby adopted,establishing rates effective July 1,2004. SECTION 3. The water system access charges are increased from$20.45 per month to$22.09 per month to reflect the increase in water rates. Upon motion of seconded by and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this day of 2004. ATTEST: Mayor Dave Romero Diane Reynolds,Acting City Clerk APPROVED AS TO FORM: J nath owell,City Attomey — I `CU EXHIBIT A to Resolution No. (Series 2004) MONTHLY WATER SERVICE RATES Rates Effective July 1, 2004 Inside the City Rates 1 -5 CCF $2.71/CCF 5—10 CCF $3.40/CCF Outside the City Rates* 1 -5 CCF $5.42/CCF 5—10 CCF $6.80/CCF For service to customers outside the City the rates are 2 times the in City rate. Attachment 4 'PUBLIC WATER TREATMENT MASTER PLAN IMPLEMENTATION CEP Project Summary Implementing projects at the Water Treatment Plant as identified in the Water Facilities Master Plan, in order to maintain water treatment quality and reliability, will cost an additional $235,000 in 2004-05 for design, and an additional $3;590,300 in 2004-05 for construction and construction management. Total cost estimate for construction and construction management is$7,800,000. Project Objectives 1. Construct a second clearwell to provide needed flexibility in treated water storage; and replace the existing clearwell which has reached the end of its service life. 2. Construct a new plant water supply line to allow the plant to be served from Reservoir #2, eliminating the . need for pumps to serve domestic and related water plant uses. 3. Replace existing transfer pump station located about '/s mile from water plant site with new traftsfer pump station at water treatment plant to improve efficiency,reliability and security of facilities. 4. Retrofit existing steel wash water tank to meet current seismic design standards to insure reliable operation following an earthquake event. 5. Add additional sedimentation facilities to increase the sedimentation capacity from 8 mgd to the full plant rated capacity of 16 mgd. 6. Construct additional plant improvements which include new fluoride feed system, new HVAC systems, new plant control system,etc.to insure efficient and reliable operation of the water treatment plant facility. Revised ClIP Request The City's Water Master Plan was completed in October 2000 and identified improvements necessary to meet full build-out of the City as identified in the General Plan. The Master Plan identified several improvements at the water treatment plant which included an additional treated water storage tank, seismic upgrade of existing tanks, replacement of existing pumps and several other minor projects. During development of the Preliminary Design Report for the project,a number of other improvements were identified by staff for inclusion in the project(see#6 above). These areas were not identified in the "higher level" review undertaken during the Water Master Plan development. In addition, as discussed below, the Master Plan identified a need for an additional sedimentation basin which was not included in the initial CIP request for this project. Funding has been included in this revised CIP request for an additional sedimentation process as well as other needed improvements/upgrades identified above. The project is anticipated to be debt financed. EAsting Situation The existing Water Treatment Plant was originally constructed in the early 1960's. In the early 1990's, the City completed substantial improvements at the plant to meet more stringent water quality requirements mandated by the federal government. In addition, the plant capacity was increased from 11.5 mgd to 16.0 mgd following the plant upgrade. The additional capacity assumes that 8 mgd is delivered from Whale Rock Reservoir and bypasses the existing sedimentation basin. The rated capacity of the sedimentation basin is 8 mgd. Treatment of water from other than Whale Rock Reservoir, will require additional sedimentation capacity. In addition, utilization of the sedimentation process for Whale Rock water supplies, enhances the treatment process and improves plant filter efficiencies. The water treatment plant currently has one 4-million gallon treated water storage tank on-site. The tank was scheduled to be recoated during the upgrade project at the Water Treatment Plant, but due to system constraints and complications,the recoating was deleted from the contract. The Water System Master Plan recommended an d - ATIACHMEW 4 PUBLIC UTILITIES WATER TREATMENT MASTER PLAN IMPLEMENTATION additional treated water storage facility (clearwell) on-site to provide enhanced operations and reliability. The preliminary recommendation was for an additional 4.0 mg tank. The Preliminary Design Report prepared by Black and Veatch reevaluated the appropriate onsite storage needs as well as performed a seismic evaluation of the existing clearwell. Based on the evaluation of the existing tank and the cost for seismic retrofit of the tank, it was determined that the existing clearwell should be demolished and a new replacement clearwell constructed.. The study recommended two onsite storage tanks with a combined capacity of 5.0 mgd. This will provide the necessary storage for operation flexibility and provide the ability to take one tank out of service for maintenance or repairs. The Preliminary Design Report also recommended the following improvements at the water treatment plant to insure reliable,high quality water service to our customers: 1. Seismic retrofit of the older wash water tank to insure operation following an earthquake event. 2. Construct a new transfer pump station onsite to replace the old transfer pump station located 'A mile from plant. 3. Replace existing fluoride feed system to minimize maintenance problems and increase system reliability. 4. Replace/upgrade existing computer monitoring and control system to insure reliability. 5. Install HVAC and ventilation systems at various locations for buildings and equipment to provide improved environment for operations staff and minimize equipment failures due to overheating. 6. Upgrade existing wash water structure to eliminate hydraulic limitations which impact plant operations. 7. Construct a new plant water supply line to allow the plant to be served from Reservoir#2,eliminating the need for pumps to serve domestic and fire protection uses. Goal and Poficy Links 1. Urban Water Management Plan, Section 4.1 2. Draft Airport Area Specific Plan, Section 8.3 3. Water System Master Plan,October 2000, Chapter 3 4. 2001-03 Financial Plan, Appendix B—Capital Improvement Plan,Page 110 5. Water Treatment Plant Preliminary Design Report, October 2003 Project Work Completed 1. Water System MasterPlan 2. Water Treatment Plant Preliminary Design Report 3. Water Treatment Plant Ballasted Flocculation Evaluation Environmental Review The consultant contract includes the preparation of the initial environmental assessment for the project. All required environmental study and documentation will be included with the project in accordance with CEQA AMUR 4 PUBLIC -UTiLITIES WATER TREATMENT MASTER PLAN IMPLEMENTATION requirements. The Community Development Department will review the environmental documentation to ensure compliance with CEQA. Other Special Review Considerations 1. These projects must comply with the requirements of other regulating agencies. 2.• Construction of the projects must not interfere with the City's water treatment operations. Project.Phasing and Funding Sources Pro'ect Costs by Type Project Costs To-Date 2004-05 2005-06 2006-07 2007-08 Total Study 247,200 247,200 Design&Environ.Review 1,017,400 235,000 1,252,400 Original Construction Budget 4,000,000 4,000,000 Additional Construction Budget 3,100,000 3,100,000 Original Construction Management 209,700 209,700 Additional Construction Management 490,300 1 1 490,300 Total 1,264,600 1 8,035,000 1 1 9,299,600 The projects identified in this request are 29.4% attributable to new development. Project Funding Source: Water Fund. The project will be debt financed. Department Coordinator and Project Review/Support Department Coordinator. Gary W.Henderson,Water Division Manager Project Review and Support: The Community Development Department will review and comment on the environmental documentation to insure compliance with all requirements. The Community Development Department will also review the treatment plant improvement plans. The Public Works Engineering division will review the plans and specifications, bid the project, and assist with construction management during construction. Ron Whisenand has reviewed this request on behalf of Community Development, and Barbara Lynch has reviewed this request on behalf of Public Works. Alternatives 1. Deny the Project. Denial of these projects may result in limitations in water treatment capabilities to meet existing and future customer demands. In addition, the improvements to water storage facilities will enhance operational abilities at the plant and provide additional storage in the event of an emergency. 2. Defer or Re phase the Request. Delaying the request will extend the time it takes to implement the improvements necessary to insure reliable water treatment facilities to meet the community's water needs. EACH&4 PUBLIC WATER TREATMENT MASTER PLAN IMPLEMENTATION Operating Program Water Treatment Project Effect on the Operating Budget Requesting Department. Approximately 200 hours of Utilities staff time will be required for consultant oversight,coordination,plan review,meetings,etc. Project Support. Approximately 48 hours of Community Development Department staff time will be required for review of the environmental documentation and project review. Approximately 20 hours of Engineering Division staff time will be required to review plans and specifications. In addition, approximately 250 hours of Engineering Division staff time will be required during construction for inspection services and contract management, which assumes a portion of the construction management will be provided by an outside consultant.